I like to keep an open mind when it comes to UK stocks, but some still instinctively worry me, including these two FTSE 100 giants. I’ve never owned either, but I’ve been sorely tempted at times. Thankfully, I didn’t seal the deal.
One name that has caught my eye is global advertising and media group WPP (LSE: WPP). It’s been under pressure since founder and driving force Sir Martin Sorrell exited under a cloud in 2018. The shares have lost 28% of their value over the past year and now trade at a 10-year low.
I’m afraid of the WPP share price
I was tempted because the stock looks cheap, with a price-to-earnings ratio around 10.5, and offers a juicy trailing yield of 7.5%. That’s one of the highest on the entire FTSE 100. This profile fits many of my recent share purchases, but I have to draw the line here.
Alongside its own missteps, WPP is also at the mercy of deep market shifts. The most pressing is artificial intelligence. Outgoing CEO Mark Read recently admitted AI is “totally disrupting our business”. That’s a worrying note for the boss to end on.
AI tools now allow companies to generate creative content in-house, potentially reducing demand for traditional media agencies. While WPP was an early adopter of the technology, I’m not convinced it can stay ahead of the curve.
It has already lost its crown as the world’s largest advertising firm by revenue to France’s Publicis. Now it faces renewed pressure from the ongoing $13.25bn merger between US rivals Omnicom and Interpublic Group.
WPP isn’t in freefall. Q1 results released on 25 April showed reported revenues down 5% to £3.24bn, and just 0.7% lower on a like-for-like basis. But the direction of travel remains unclear, and I prefer to avoid businesses in the middle of existential transitions. The new CEO, once appointed, has to get it right.
Vodafone shares trigger me too
The other stock I’ve long avoided is Vodafone (LSE: VOD). I’ve been writing about the telecoms giant for more than 15 years, and while its chunky dividends have often tempted me, the share price’s relentless decline has kept me at arm’s length.
There are reasons to be more positive today. CEO Margherita Della Valle’s turnaround plan is making more visible progress than previous efforts, and the Vodafone share price has climbed 7% over the past year.
Yes, the dividend was halved in March, but the shares still offer a solid trailing yield of 5.1%, which is comfortably above the FTSE 100 average.
Full-year revenues rose 2% to €37.4bn, and another €2bn share buyback has lifted sentiment. The merger of Vodafone UK with Three should also unlock operational benefits.
But this is still a brutally competitive sector. Vodafone faces margin pressure from low-cost rivals across key markets. And although it reduced net debt by €10.8bn in 2024, it still owes a hefty €22.4bn. That’s serious baggage as interest rates prove sticky.
It must continue pumping billions into 5G and fibre infrastructure, while still struggling in Germany despite investing €20bn there.
Vodafone is showing signs of life, but like WPP, I don’t want it let it get too close to my portfolio.
